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Restraining Yourself: Fiscal Rules and Stabilization

Author

Listed:
  • Mr. Barry J. Eichengreen
  • Mr. Tamim Bayoumi

Abstract

State budgets in the United States played a significant macroeconomic role in the 1970s and 1980s, and the level of cyclical responsiveness was affected by the severity of statutory and constitutional fiscal restraints. Moving from no fiscal restraints to the most stringent restraints lowered the fiscal offset to income fluctuations by around 40 percent. Simulations indicate that a reduction in aggregate fiscal stabilizers of this size could lead to a significant increase in the variance of aggregate output.

Suggested Citation

  • Mr. Barry J. Eichengreen & Mr. Tamim Bayoumi, 1994. "Restraining Yourself: Fiscal Rules and Stabilization," IMF Working Papers 1994/082, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1994/082
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=1122
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    Cited by:

    1. Anamaría Pieschacón, 2009. "Implementable Fiscal Rules for an Oil-Exporting Small Open Economy Facing Depletion," OxCarre Working Papers 019, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    2. Robert Amano & Donald Coletti & Tiff Macklem, 1998. "Monetary rules when economic behaviour changes," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
    3. James M. Poterba & Kim Rueben, 1999. "State Fiscal Institutions and the U.S. Municipal Bond Market," NBER Chapters, in: Fiscal Institutions and Fiscal Performance, pages 181-208, National Bureau of Economic Research, Inc.
    4. Robert Holzmann & Yves Hervé & Roland Demmel, 1996. "The maastricht fiscal criteria: Required but ineffective?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 23(1), pages 25-58, February.
    5. Alesina, A. & Passalacqua, A., 2016. "The Political Economy of Government Debt," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 2599-2651, Elsevier.
    6. Felicity C Barker & Robert A Buckle & Robert W St Clair, 2008. "Roles of Fiscal Policy in New Zealand," Treasury Working Paper Series 08/02, New Zealand Treasury.
    7. Lane, Philip R., 2003. "The cyclical behaviour of fiscal policy: evidence from the OECD," Journal of Public Economics, Elsevier, vol. 87(12), pages 2661-2675, December.
    8. Marcela Eslava, 2011. "The Political Economy Of Fiscal Deficits: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 25(4), pages 645-673, September.

    More about this item

    Keywords

    WP; government; State budget; state government; local government; Fiscal stabilization; fiscal restraints; government balance; Govt. deficit; government structure; local government sector; budget balance; state government equation; Fiscal stance; Budget planning and preparation; Europe;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing

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